1973 Arab oil embargo shaped energy policy

James Schlesinger was sitting at his desk in the Pentagon when the Saudi oil minister’s cable arrived: “According to his Majesty King Faisal,” it read, “I am instructed to cut off all oil supplies to the Sixth Fleet in the Mediterranean and to your forces in Europe.”

It was October 1973 and Arab nations angered by Washington’s support for Israel in the Yom Kippur War were unleashing their long-dormant oil weapon against the United States.

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Schlesinger, Richard Nixon’s defense secretary, was “infuriated.” For the U.S., the oil cutoff would soon morph into a full-fledged Arab oil embargo, then into an energy crisis that sent domestic gasoline prices spiraling, spawning long lines at the pumps and introducing Americans to their new status as beggars in the world’s petroleum markets — victims to the whims of desert sheiks and every tremor from Tripoli to Tehran.

The trauma of 1973 has shaped every presidency since then, and the U.S. is still absorbing its lessons. Each administration in the past four decades has called for achieving U.S. energy independence, and each has been lambasted for failing to come up with a national strategy for weaning the nation off foreign oil. Washington remains sharply divided on what such a strategy should entail: opening up more of the coastline to drilling, digging more coal, growing ethanol, building pipelines from Canada, erecting windmills and solar panels, or “all of the above.”

Some, like Schlesinger, draw a different lesson: The U.S. ended up with an energy strategy that’s working — but the government didn’t create it.

American petroleum fields are booming now, thanks to new techniques for tapping into shale, and the U.S. is poised to overtake Russia as the world’s top oil and natural gas producer. Oil imports are falling while cars and homes are greener and more efficient. Even when gas prices rise in response to some crisis abroad, consumers don’t panic as they did in the 1970s.

Schlesinger, who went on to become the first energy secretary during the Carter administration, says OPEC encouraged those trends and helped seal its own fate by overreaching in the 1970s. Meanwhile, the shale boom was “manna from heaven.”

“That is not because of the ingenuity of government or of government officials,” he said during an interview at his home in Arlington, Va. “That was the generosity of the Lord Almighty.”

Others say U.S policies have helped but disagree on how much.

“I like to describe our energy policy in this country as a policy by default, that without perhaps thoughtful planning and strategy and envisioning we’ve gotten to the place that we had hoped that we would be,” said Alaska Sen. Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee.

Turning the tables

The 1973 embargo was one of those moments when the world changed.

U.S. crude oil production had peaked in 1970, starting a multidecade slide and strengthening the hands of the Arab oil producers. After Egypt and Syria led a surprise attack on Israel in early October 1973, overt U.S. support for the Israelis prompted the Saudis to play their hand.

“Until that point, particularly in the Cold War, everything was about the big guys,” said Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations. The embargo, he said, proved “that little guys could also pose big threats.”

Now the U.S. has turned the tables again — though experts caution against overstating how much.

True, net petroleum imports are declining rapidly, down to 40 percent of the U.S. supply last year from a peak of 60 percent in 2006, and the United States’ largest foreign supplier is Canada.

But oil prices are way up — accounting for inflation, a barrel of oil sells for almost six times what it did 15 years ago — and still gyrate based on events in countries like Libya or Syria. We imported more barrels from the Persian Gulf last year than we did in 1990, the year Saddam Hussein’s invasion of Kuwait and seizure of its oil fields triggered the confrontation that led to the first Gulf War.

In addition, the Saudis still lead the world in crude oil production. Their vast resources and spare production capacity leave them with the biggest influence on the world price, even if the U.S. ends up taking the crown as the top producer of oil and natural gas combined.

“We’re No. 1, and that clearly puts us in a different position than we were 40 years ago when we were very, very, very vulnerable,” Murkowski said. “That vulnerability is still there but not nearly to the extent and to the degree that we faced four decades ago.”

Best-selling oil historian Daniel Yergin agreed. “Now, 40 years later, the Middle East is still very much a caldron of risk for the world oil markets, but we’re better prepared to deal with it,” he said.

Who gets the credit?

Ken Salazar, the former Interior secretary to President Barack Obama, said some credit for the turnaround should go to both Congress and the executive branch.

“Over the last eight years, through our combination of congressional actions and executive actions, we’re in the best position we’ve been as a nation at any time since our oil embargo,” Salazar said.

The former Colorado senator credits major energy legislation in 2005 and 2007 for increasing domestic oil and gas production, boosting vehicle fuel efficiency and diversifying the nation’s fuel blend. Since then, Obama’s policies have steered billions of dollars into wind and solar power while achieving big boosts in vehicle fuel-efficiency standards, although Republicans fault him for proposing regulations on fracking and failing to open up more of the coastline to drilling.

Salazar said future legislation would also help, such as a bipartisan energy-efficiency package that has been stalled in Congress.

Other experts say the turnaround since 1973 stems from long-term policies that stretch beyond a single presidency.